- 04 Jul 2024
- ICICI Securities
ULTRATECH CEMENT IN RACE TO BUY ORIENT CEMENT
ORIENTCEM - 353 Change: 1.75 (0.50 %)News: As per the media reports, UltraTech Cement is in advanced negotiations with Orient Cement to acquire its cement assets. UltraTech is said to have offered a valuation of $103-110/ton (~22% premium to current valuation) for Orient Cement’s 8.5 million tonnes (mtpa) capacity (of which 3.5 mtpa integrated unit is in Telangana, 3 mtpa integrated unit is in Karnataka and 2 mtpa grinding unit in Maharashtra).
Views: We believe the acquisition will be value accretive for UltraTech as the valuation of $103-110/ton is lower than the cost of setting up an integrated greenfield cement plant (~$120/ton) leading to savings in terms of capex cost and time required for setting up the plants. This would also help UltraTech to increase its exposure in southern & western markets and reaching near to its target of reaching 200 mtpa by FY27 (from 155 mtpa at present). Consolidation may also lead to synergies in the form of cost reduction and improvement in operational efficiencies. Offering valuation at ~22% premium to the current valuation is a significantly positive for Orient Cement also considering the recent acquisitions in the the range of $85-100/ton.
Impact: Positive